Gas bills may bring extra chill

BY DAVE FLESSNER

AND JAMIE HANCOCK

Staff Writers

When Chickamauga, Ga., farmer Danny Thomas filled up his propane tank two months ago, it cost him nearly $600 more than it did a year ago.

The chicken farmer, who has to fill his tank at least a half dozen times a year, worries that the turmoil in the Middle East may force him to pay even more the next time he buys propane.

"It's terrible. I dread it," said Mr. Thomas, who said he is forced to absorb most of the cost of the higher fuel. "Nobody's telling us what the final price will be -- ouch!"

Mr. Thomas and other users of propane and natural gas are feeling the bite of higher energy prices this winter. Wholesale gas and heating oil prices are up more than 40 percent over last year, and the unrest in the Mideast this week helped push up oil and gas prices by another 10 percent in some trading markets.

The typical homeowner who heats with propane fuel will probably pay from $150 to $200 more this winter than last year, experts predict. If the weather turns a lot colder, heating bills could be several hundred dollars higher.

Farmers and homeowners who heat with propane and natural gas have enjoyed both mild prices and temperatures for the past three winters. But this winter could force most gas users to pay out a lot more cold cash to stay warm.

The increased demand for gas combined with OPEC oil cartel and other supply restrictions have driven up the prices of all petroleum products, including gas, oil, natural gas and propane. After two years of above-normal temperatures, colder weather is expected this winter, which could push heating bills even higher this year compared with recent winters.

"Homeowners who heat with gas should expect to pay 30 to 40 percent higher rates this winter, and their bills could be even higher if it is a cold winter," said David Waddell, executive secretary for the Tennessee Regulatory Authority, the state agency that regulates natural gas companies in Tennessee. "People should plan for it and not be shocked by it."

Atlanta Gas and Light Co., the parent company of Chattanooga Gas and Cleveland Gas, estimates its wholesale gas costs are up 50 percent this winter compared with a year ago. The utility won't raise its base fee or its own administrative charges, so gas users won't feel the full impact of the wholesale price increases. But the higher price for natural gas at the wellhead will flow to consumers when they turn up their thermostats this winter.

"Hopefully in the long run we'll see some decrease again in prices," said Nick Gold, a spokesman for Chattanooga Gas. "There is plenty of gas in the field and the higher prices are obviously encouraging more rigs to explore for gas in the field."

But for now, gas supplies remain limited and prices continue to flirt with their highest levels in a decade on the volatile New York Mercantile Exchange.

This contrasts with comparatively low prices and an abundant supply of gas for much of the late 1990s. The low prices led to little incentive for the natural gas industry to increase production or explore new avenues to find gas, energy experts said.

The result -- less supply and increasing demand -- has led to skyrocketing prices on the commodities market. Since the start of this year, prices have doubled to more than $5 per million British thermal units, the market's standard measure.

Analysts see the prices eventually declining. Ron Denhardt, vice president of natural gas for a Bedford, Mass.-based economic forecasting firm, said high prices would draw producers back, but the industry lacks workers and rigs for drilling.

"Prices are going to gradually decline," Mr. Denhardt said. "How fast, I don't know."

In the meantime, gas distributors -- both propane and natural gas -- don't want consumers blaming them for higher prices this winter. By law, Chattanooga Gas Co. cannot profit from the price of natural gas as a commodity; the company simply passes the wholesale cost along from the gas producers to customers. Distributors such as Chattanooga Gas make money from delivery to customers.

Some propane distributors have tried to lessen the winter costs of their fuel by allowing consumers to cap their prices through a comfort heating program. Bradley Propane Co., for instance, said customers who participate in the cap price program should have only about a 20 percent jump in fuel prices this winter compared with last year.

"From our company standpoint, we have put programs in place to try to minimize some of the effects of the higher prices," said James Pratt, president of Bradley Propane.

Consumers who agreed this summer to buy their propane should enjoy lower prices than those having to shop the market now.

Low-income people hurt by the higher heating bills this winter may qualify for assistance through the Low Income Home Energy Assistance Program. The federal program, administered in Tennessee by the Department of Human Services, is used to provide heating assistance, cooling assistance and other help for emergency energy needs during the winter and summer seasons.

The Tennessee Regulatory Authority also has asked Chattanooga Gas and the two other natural gas companies in Tennessee to develop contingency plans for addressing consumer concerns about the higher prices. The authority has asked the gas distributors to present those plans to the state by Dec. 1.

But while most consumers wait to pay the higher heating bills this winter, the Thomases already are feeling the pinch.

Mr. Thomas said poultry farmers like him have little choice but to pay the higher fuel bills.

"You can't reduce the amount you use because the baby chicks would freeze," he said.

Some homeowners are turning back to their wood stoves for heat to help offset the higher fuel prices.

"Business has been good, and we do deliver," said Kim Pody, an employee at Ronnie's Firewood and Kindling on Signal Mountain Road.

Currently, firewood is selling for around $40 to $50 per rick. A rick of wood is a stack about 4 feet high and 8 feet long.

"With the unseasonably cooler temperatures, everybody panics and buys wood," said owner Skip Wilson, who usually sells about 75 ricks per year.

Kristy Watkins, co-owner of Watkins Tree Service in Apison, believes people are bracing for a bad winter.

"I think people are getting prepared for the worst," she said. "Our firewood always sells ... it's that or nothing."

Many homeowners added propane and gas service after the 1993 snowstorm, which left some homeowners without power for more than a week. Even with higher prices, most gas users and distributors claim it is still more economical to heat with gas than electricity.

"It's starting to get cold and I want my fireplace filled," said Judy Schober, a Hixson woman who wants to avoid problems like those her family experienced in the 1993 winter storm. "I'm not leaving my home again -- I'm ready."

The Schobers recently installed a 120-gallon propane tank and a new propane fireplace at their Gadd Road home.

http://www.timesfreepress.com/2000/oct/14oct00/webheating.html

-- Martin Thompson (mthom1927@aol.com), October 14, 2000